Has the Tiger lost its teeth?

By TESTCustomwebLP TESTCustomwebLP
October 5, 2010 23:00

Tiger Airways Holdings’ shares plunged as much as 3.9% to $1.96 in trading yesterday before closing at $2.01, down 1.47% on heavy trading volume of 1.8m shares. This was after the low cost airline was forced to cancel 40 flights over four days last week due to technical issues with 2 of its A320 aircraft. Tiger confirmed over the weekend that the flight disruptions affected several hundred passengers but the reality is that a few thousand people were grounded.

Tiger said one aircraft was out of operation for several weeks. As the aircraft was only delivered in February, Tiger said it had successfully claimed against the warranty. The other aircraft was removed from service for a week because of fuel tank contamination.

Tiger is a success story but we all know that there is very little leeway for low cost airlines in the event of a problem due to the tight scheduling and high utilisation. Tiger in this instance has proved that one aircraft out of action can cause a problem but two aircraft out of action causes things to grind to a stop. It is very interesting to note that local Asian investors were obviously shocked at the news over the weekend and never for one moment realised that a low cost operation can be so adversely affected by the loss of just two aircraft. They live and learn. Tiger though has a huge PR exercise to perform over the coming days and weeks and it will be important to see if the share price fully rebounds by the end of the month or if it stays depressed which will of course affect the ability of Tiger to push forward with expansion.